Mean reversion rsi

RSI (Relative Strength Index)

Bullish: RSI crosses above oversold level (default 30) from below. Bearish: RSI crosses below overbought level (default 70) from above. Uses Wilder's smoothed moving average.

Signal family

Mean reversion — Oscillator-based signals that fire at overbought or oversold extremes — typically fade the prevailing move.

Parameters

Name Description Default Range
period RSI period 14 5–50
overbought Overbought level 70 60–90
oversold Oversold level 30 10–40

Historical context

1,194,048 triggers on 23,777 tickers, 1988-04-29 → 2026-05-01. Universe: US large-cap (mcap ≥ $100,000,000, price ≥ $1). Long-only convention: BUY at open T+1, hold the horizon, compare to S&P 500 Equal Weight over the same window.

Methodology footnotes

Benchmarks shown in the detail tables: spxew (S&P 500 Equal Weight — primary, median-stock view, avoids the 2020+ megacap-concentration distortion), spx (S&P 500 cap-weighted, distorted post-2020), msci (MSCI World USD). Per-stock regime tags: trending = ADX(14) ≥ 25, high vol = 20d realized annualized vol ≥ 20%. 1d return = intraday T+1 open→close; 20d = open T+1 to close T+20.

At a glance — alpha vs S&P 500 Equal Weight, US-only

Holding-period sensitivity. Bullish columns: positive = signal worked (long the trigger beat the index). Bearish columns: negative = signal worked (the flagged stock underperformed).

Horizon Bullish α Bearish α
5-day +0.19% +0.07%
20-day +0.25% +0.47%
60-day +0.22% +1.05%
1-year +1.14% +5.79%
Random-date null check (20-day): Bullish: beats random (p=0.005).
Bearish: worse than random (p=1.000).

Where does RSI actually fire?

The bucket distribution often reveals what the signal really is, regardless of its textbook label. Heavy concentration in "non-trending + high vol" = it's mostly a chop-market event. Heavy in "trending + low vol" = it picks up the smooth grinds. Read the chart before the alpha numbers — context shapes everything that follows.

RSI (Relative Strength Index) (rsi) — trigger count distribution by per-stock regime quadrant (trending/non-trending × high/low realized volatility) for , US-only universe

Does it work in every regime?

Trigger alpha split by the host stock's own regime on the trigger date — trending or ranging, high-vol or low-vol. The 20d alpha you'd actually capture if you took the trade. Bars matching your direction's "right" sign (green) = the signal worked in that regime; opposite sign = avoid it there. A signal with one strong-positive bar and three flat ones isn't a "20d alpha" signal — it's a "20d alpha when the stock is X" signal.

RSI (Relative Strength Index) (rsi) — mean 20-day alpha versus S&P 500 Equal Weight by per-stock regime quadrant, side by side
Trending + Low vol
Stock in a clean directional move with low realized volatility. Textbook "trend-following paradise" — smooth grind with little whipsaw risk.
Trending + High vol
Violent directional moves — parabolic rallies, crisis selloffs. Trend exists but the path is noisy. Signal timing may be imprecise.
Non-trending + Low vol
Quiet chop, summer doldrums, consolidations. No directional bias but also no big swings — small edges become reliable if they exist at all.
Non-trending + High vol
Choppy and violent — the classical "whipsaw zone" for momentum signals. Crossovers and breakouts fire repeatedly without follow-through.

Does it work in every era?

A multi-year average can hide major instability. The sample splits into three windows: 2015–2019 (pre-COVID), 2020–2022 (pandemic + 2022 bear), and 2023+ (post-ZIRP + AI megacap rally). All three matching your direction's "right" sign = the signal is durable. One era doing all the work = a regime-specific edge that may not repeat. The bigger the variance across eras, the smaller the position you should run.

RSI (Relative Strength Index) (rsi) — 20-day alpha split by historical sub-period (2015-2019, 2020-2022, 2023+) to check consistency across market regimes

↑ Bullish triggers

Bench Metric 1d 5d 20d 60d 252d
spx Stock % +0.09% +0.47% +1.78% +3.66% +13.30%
Bench % +0.06% +0.29% +1.74% +3.84% +15.48%
Alpha % +0.00% +0.13% +0.03% -0.18% -2.13%
Median alpha -0.06% -0.13% -0.76% -2.19% -11.03%
Hit rate (α>0) 48.6% 48.7% 46.3% 44.2% 37.4%
p (naive) 0.8919 <0.001 0.1374 <0.001 <0.001
p (HAC) 0.8920 <0.001 0.2332 <0.001 <0.001
N 497,854 482,511 481,046 465,046 436,805
msci Stock % +0.09% +0.47% +1.78% +3.66% +13.30%
Bench % +0.09% +0.29% +1.50% +3.54% +13.03%
Alpha % +0.01% +0.13% +0.20% +0.15% -0.54%
Median alpha -0.09% -0.16% -0.60% -1.92% -9.02%
Hit rate (α>0) 48.0% 48.4% 47.0% 44.8% 39.2%
p (naive) 0.1346 <0.001 <0.001 <0.001 <0.001
p (HAC) 0.1361 <0.001 <0.001 0.0005 0.0087
N 494,500 477,152 471,477 462,324 426,023
spxew Stock % +0.09% +0.47% +1.78% +3.66% +13.30%
Bench % +0.06% +0.21% +1.47% +3.44% +11.68%
Alpha % +0.01% +0.19% +0.25% +0.22% +1.14%
Median alpha -0.07% -0.08% -0.54% -1.78% -7.38%
Hit rate (α>0) 48.3% 49.2% 47.4% 45.1% 40.9%
p (naive) 0.0722 <0.001 <0.001 <0.001 <0.001
p (HAC) 0.0731 <0.001 <0.001 <0.001 <0.001
N 495,565 479,214 472,184 460,098 427,228
Distribution of all 20d alpha outcomes for this direction. Median and winsorized mean shown.
RSI (Relative Strength Index) (rsi) — bullish 20-day alpha histogram showing distribution of per-trigger returns
Observed 20d alpha (vertical line) against the null distribution of random-date firing. If the line is deep inside the null cloud, the signal adds no information. If it sits in a tail, the signal is doing real work in that direction.
RSI (Relative Strength Index) (rsi) — bullish 20-day observed alpha versus random-date permutation null (200 iterations)
Permutation null detail — all horizons × both benchmarks
200-iteration null: for each ticker, sample N random dates from its history (matching observed trigger count) and compute the same alpha. Both observed and null are baseline-centered per ticker (each ticker's own baseline alpha is subtracted), so the null distribution is centered on ~0 and the comparison tests signal effect alone — not the universe-selection lift that all surviving large-caps share. pperm = one-sided fraction of null iters with mean in the "signal was right" tail (right for bullish, left for bearish).
Horizon Bench Observed lift Null mean Null 95% CI pperm
1d spx +0.14% +0.09% [+0.08%, +0.10%] 0.005
1d msci +0.17% +0.09% [+0.09%, +0.10%] 0.005
1d spxew +0.16% +0.08% [+0.07%, +0.09%] 0.005
5d spx +0.60% +0.38% [+0.36%, +0.39%] 0.005
5d msci +0.59% +0.38% [+0.36%, +0.40%] 0.005
5d spxew +0.61% +0.36% [+0.34%, +0.38%] 0.005
20d spx +1.49% +1.20% [+1.17%, +1.23%] 0.005
20d msci +1.54% +1.21% [+1.18%, +1.25%] 0.005
20d spxew +1.48% +1.17% [+1.13%, +1.21%] 0.005
60d spx +3.26% +2.61% [+2.55%, +2.66%] 0.005
60d msci +3.18% +2.63% [+2.57%, +2.69%] 0.005
60d spxew +2.92% +2.54% [+2.49%, +2.60%] 0.005
252d spx +6.63% +5.42% [+5.31%, +5.55%] 0.005
252d msci +6.15% +5.37% [+5.26%, +5.50%] 0.005
252d spxew +6.00% +5.10% [+5.00%, +5.23%] 0.005

Example triggers on US large-caps (2023+, mcap ≥ $30B)

Six recent bullish RSI triggers on US mega-caps. Top three: the signal's best outcomes. Bottom three: the worst. Catalyst-driven outliers (|α| > 25%) excluded so what's left is the signal's own typical good and bad days, not earnings shocks.

Strongest outcomes (what RSI looks like when it works)
RSI (Relative Strength Index) (rsi) — strongest bullish trigger #1 on a US mega-cap, showing the stock's OHLC candles, moving averages, signal-specific overlays, and the 20-day forward window RSI (Relative Strength Index) (rsi) — strongest bullish trigger #2 on a US mega-cap, showing the stock's OHLC candles, moving averages, signal-specific overlays, and the 20-day forward window RSI (Relative Strength Index) (rsi) — strongest bullish trigger #3 on a US mega-cap, showing the stock's OHLC candles, moving averages, signal-specific overlays, and the 20-day forward window
Weakest outcomes (what RSI looks like when it fails)
RSI (Relative Strength Index) (rsi) — weakest bullish trigger #1 on a US mega-cap, showing the 20-day forward window where the signal failed RSI (Relative Strength Index) (rsi) — weakest bullish trigger #2 on a US mega-cap, showing the 20-day forward window where the signal failed RSI (Relative Strength Index) (rsi) — weakest bullish trigger #3 on a US mega-cap, showing the 20-day forward window where the signal failed
Stock-regime quadrants (2×2 per-stock, 20d alpha detail table)
Each quadrant groups triggers by the stock's own ADX(14) and RV(20) at the trigger date — the textbook conditioning variable (not market-level). Stock %, bench %, alpha %, and HAC p-value shown for each benchmark.
Quadrant N Stock % (spx) Bench % (spx) Alpha % (spx) p (HAC) Stock % (msci) Bench % (msci) Alpha % (msci) p (HAC) Stock % (spxew) Bench % (spxew) Alpha % (spxew) p (HAC)
Trending + Low vol Clean directional grind, low whipsaw 55,247 +0.22% +1.18% -0.93% <0.001 +0.22% +1.03% -0.79% <0.001 +0.22% +0.96% -0.67% <0.001
Trending + High vol Crisis selloff or parabolic rally 331,737 +2.19% +1.88% +0.29% <0.001 +2.19% +1.62% +0.49% <0.001 +2.19% +1.62% +0.50% <0.001
Non-trending + Low vol Quiet chop, summer doldrums 22,625 +0.01% +1.18% -1.14% <0.001 +0.01% +1.06% -1.03% <0.001 +0.01% +0.97% -0.90% <0.001
Non-trending + High vol Classical "whipsaw zone" for momentum 102,998 +1.74% +1.79% -0.04% 0.3339 +1.74% +1.59% +0.08% 0.0715 +1.74% +1.46% +0.22% <0.001
Sub-period breakdown table (20d alpha)
Historical clustering check. If alpha concentrates in one era, the signal's robustness is questionable.
Period N Alpha % (spx) p (HAC) Alpha % (msci) p (HAC) Alpha % (spxew) p (HAC)
2015-2019 2015-01-01 → 2020-01-01 164,305 +0.16% <0.001 +0.39% <0.001 +0.13% <0.001
2020-2022 2020-01-01 → 2023-01-01 154,976 +0.18% <0.001 +0.48% <0.001 +0.19% <0.001
2023-2026 2023-01-01 → 2099-01-01 193,159 -0.21% <0.001 -0.21% <0.001 +0.41% <0.001

↓ Bearish triggers negative alpha = signal was right (stock underperformed market)

Bench Metric 1d 5d 20d 60d 252d
spx Stock % +0.03% +0.24% +1.05% +3.09% +15.48%
Bench % +0.01% +0.19% +0.89% +3.01% +13.67%
Alpha % +0.01% +0.05% +0.20% +0.08% +1.72%
Median alpha -0.07% -0.31% -1.00% -2.74% -8.91%
Hit rate (α>0) 48.2% 46.8% 45.2% 42.8% 39.8%
p (naive) 0.0008 <0.001 <0.001 0.0055 <0.001
p (HAC) 0.0008 <0.001 <0.001 0.1315 <0.001
N 660,384 640,062 635,556 620,955 539,837
msci Stock % +0.03% +0.24% +1.05% +3.09% +15.48%
Bench % +0.03% +0.17% +0.75% +2.55% +11.10%
Alpha % -0.00% +0.08% +0.35% +0.56% +4.25%
Median alpha -0.08% -0.29% -0.86% -2.27% -6.35%
Hit rate (α>0) 48.0% 47.0% 45.9% 44.0% 42.6%
p (naive) 0.7245 <0.001 <0.001 <0.001 <0.001
p (HAC) 0.7247 <0.001 <0.001 <0.001 <0.001
N 656,764 637,264 634,670 615,332 537,887
spxew Stock % +0.03% +0.24% +1.05% +3.09% +15.48%
Bench % +0.03% +0.17% +0.65% +2.07% +9.76%
Alpha % -0.01% +0.07% +0.47% +1.05% +5.79%
Median alpha -0.08% -0.27% -0.69% -1.71% -4.75%
Hit rate (α>0) 48.2% 47.3% 46.7% 45.5% 44.3%
p (naive) 0.1552 <0.001 <0.001 <0.001 <0.001
p (HAC) 0.1555 <0.001 <0.001 <0.001 <0.001
N 654,527 632,314 630,024 612,381 534,017
Distribution of all 20d alpha outcomes for this direction. Median and winsorized mean shown.
RSI (Relative Strength Index) (rsi) — bearish 20-day alpha histogram showing distribution of per-trigger returns
Observed 20d alpha (vertical line) against the null distribution of random-date firing. If the line is deep inside the null cloud, the signal adds no information. If it sits in a tail, the signal is doing real work in that direction.
RSI (Relative Strength Index) (rsi) — bearish 20-day observed alpha versus random-date permutation null (200 iterations)
Permutation null detail — all horizons × both benchmarks
200-iteration null: for each ticker, sample N random dates from its history (matching observed trigger count) and compute the same alpha. Both observed and null are baseline-centered per ticker (each ticker's own baseline alpha is subtracted), so the null distribution is centered on ~0 and the comparison tests signal effect alone — not the universe-selection lift that all surviving large-caps share. pperm = one-sided fraction of null iters with mean in the "signal was right" tail (right for bullish, left for bearish).
Horizon Bench Observed lift Null mean Null 95% CI pperm
1d spx +0.13% +0.09% [+0.08%, +0.09%] 1.000
1d msci +0.15% +0.09% [+0.08%, +0.10%] 1.000
1d spxew +0.13% +0.08% [+0.07%, +0.08%] 1.000
5d spx +0.44% +0.36% [+0.35%, +0.38%] 1.000
5d msci +0.46% +0.37% [+0.36%, +0.39%] 1.000
5d spxew +0.42% +0.35% [+0.33%, +0.36%] 1.000
20d spx +1.31% +1.17% [+1.14%, +1.20%] 1.000
20d msci +1.34% +1.18% [+1.15%, +1.22%] 1.000
20d spxew +1.34% +1.14% [+1.11%, +1.17%] 1.000
60d spx +2.20% +2.54% [+2.49%, +2.59%] 0.005
60d msci +2.26% +2.56% [+2.51%, +2.60%] 0.005
60d spxew +2.42% +2.48% [+2.43%, +2.52%] 0.030
252d spx +4.58% +4.96% [+4.88%, +5.05%] 0.005
252d msci +4.72% +4.90% [+4.81%, +5.00%] 0.005
252d spxew +4.48% +4.60% [+4.51%, +4.70%] 0.010

Example triggers on US large-caps (2023+, mcap ≥ $30B)

Six recent bearish RSI triggers on US mega-caps. Top three: the signal's best outcomes. Bottom three: the worst. Catalyst-driven outliers (|α| > 25%) excluded so what's left is the signal's own typical good and bad days, not earnings shocks.

Strongest outcomes (what RSI looks like when it works)
RSI (Relative Strength Index) (rsi) — strongest bearish trigger #1 on a US mega-cap, showing the stock's OHLC candles, moving averages, signal-specific overlays, and the 20-day forward window RSI (Relative Strength Index) (rsi) — strongest bearish trigger #2 on a US mega-cap, showing the stock's OHLC candles, moving averages, signal-specific overlays, and the 20-day forward window RSI (Relative Strength Index) (rsi) — strongest bearish trigger #3 on a US mega-cap, showing the stock's OHLC candles, moving averages, signal-specific overlays, and the 20-day forward window
Weakest outcomes (what RSI looks like when it fails)
RSI (Relative Strength Index) (rsi) — weakest bearish trigger #1 on a US mega-cap, showing the 20-day forward window where the signal failed RSI (Relative Strength Index) (rsi) — weakest bearish trigger #2 on a US mega-cap, showing the 20-day forward window where the signal failed RSI (Relative Strength Index) (rsi) — weakest bearish trigger #3 on a US mega-cap, showing the 20-day forward window where the signal failed
Stock-regime quadrants (2×2 per-stock, 20d alpha detail table)
Each quadrant groups triggers by the stock's own ADX(14) and RV(20) at the trigger date — the textbook conditioning variable (not market-level). Stock %, bench %, alpha %, and HAC p-value shown for each benchmark.
Quadrant N Stock % (spx) Bench % (spx) Alpha % (spx) p (HAC) Stock % (msci) Bench % (msci) Alpha % (msci) p (HAC) Stock % (spxew) Bench % (spxew) Alpha % (spxew) p (HAC)
Trending + Low vol Clean directional grind, low whipsaw 91,414 +0.43% +0.66% -0.22% <0.001 +0.43% +0.49% -0.04% 0.1218 +0.43% +0.32% +0.15% <0.001
Trending + High vol Crisis selloff or parabolic rally 473,601 +1.24% +0.94% +0.35% <0.001 +1.24% +0.80% +0.49% <0.001 +1.24% +0.70% +0.62% <0.001
Non-trending + Low vol Quiet chop, summer doldrums 28,011 +0.57% +0.66% -0.08% 0.0473 +0.57% +0.50% +0.09% 0.0401 +0.57% +0.38% +0.21% <0.001
Non-trending + High vol Classical "whipsaw zone" for momentum 88,401 +1.00% +0.94% +0.09% 0.0583 +1.00% +0.84% +0.20% <0.001 +1.00% +0.77% +0.27% <0.001
Sub-period breakdown table (20d alpha)
Historical clustering check. If alpha concentrates in one era, the signal's robustness is questionable.
Period N Alpha % (spx) p (HAC) Alpha % (msci) p (HAC) Alpha % (spxew) p (HAC)
2015-2019 2015-01-01 → 2020-01-01 205,195 -0.37% <0.001 -0.15% <0.001 -0.07% 0.0157
2020-2022 2020-01-01 → 2023-01-01 195,060 +0.48% <0.001 +0.60% <0.001 +0.31% <0.001
2023-2026 2023-01-01 → 2099-01-01 280,969 +0.45% <0.001 +0.56% <0.001 +1.01% <0.001

Methodology and caveats

How to read. Entry at open of T+1 (one trading day after the signal fires on close of T). 20d = open T+1 to close T+20. Alpha = stock return − benchmark return over the same window (Convention A, single-sided, textbook). For bullish triggers, POSITIVE alpha = signal was right. For bearish triggers, NEGATIVE alpha = signal was right (stock underperformed market). No sign-flipping; the direction of the bet determines what "good" looks like. Per-stock regime is each stock's own ADX(14) and RV(20) at the trigger date — not market-wide state.

Three p-values, three robustness tests. (a) p_naive: scipy one-sample t-test on winsorized alphas. Optimistic because overlapping 20d windows on the same ticker inflate effective N. (b) p_hac: Newey-West HAC with lag = horizon — corrects for the overlap and is the academic-finance standard. (c) p_perm: fraction of 200 random-date null iterations with mean ≥ observed. Tests whether the signal beats random date selection at all. A signal that clears all three (pnaive, phac, pperm all < 0.05) has real information; a signal that fails pperm has zero edge even if the t-test says "significant."

Caveats. (i) Universe reflects today's active tickers; delisted losers pruned → survivorship bias. (ii) Mcap ≥ $100M filter uses today's snapshot, not point-in-time — mild lookahead on which stocks enter the sample, not on returns. (iii) Means and p-values use winsorized alphas (1/99 percentile) to prevent data errors from dominating. Medians and hit rates use raw data. (iv) Zero transaction costs assumed. Realistic bid-ask + commissions remove 20–40bps from 20d alpha on US large-caps, more on small-cap. Sub-20bps alpha is noise in practice. (v) Past performance does not predict future results.

How to use this

1 · When to reach for this signal

Use RSI (Relative Strength Index) bullish as a long-side screening tile. Observed 20d alpha vs S&P 500 Equal Weight is +0.03%, which beats random (permutation test, 200 iterations). The bearish side does not add edge (worse than random ) — treat it as noise, not a short trigger.

2 · When it works — the setups that drive it

  • Best bullish setup: Trending + High vol — alpha +0.29% / 20d on 331,737 historical triggers.
  • Best bearish setup: Trending + High vol — alpha +0.35% / 20d on 473,601 historical triggers.
  • Best era for bullish: 2020-2022 — alpha +0.18% / 20d.
  • Best era for bearish: 2020-2022 — alpha +0.48% / 20d.

3 · When it fails — common false positives

  • Weakest bullish cell: Non-trending + Low vol — alpha -1.14% / 20d on 22,625 triggers.
  • Weakest bearish cell: Trending + Low vol — alpha -0.22% / 20d on 91,414 triggers.
  • Worst era for bullish: 2023-2026 — alpha -0.21% / 20d.
  • Worst era for bearish: 2015-2019 — alpha -0.37% / 20d.

Signal-specific failure patterns

Bullish RSI works in sideways markets, fails in megacap bull markets
Sub-period breakdown reveals RSI bullish had +0.52% alpha per 20d in 2015-2019, a normal dispersed market. Then −0.78% in 2020-2022 (COVID whipsaws) and −0.60% in 2023-2026 (AI megacap rally). The signal fires on oversold laggards; when index returns are concentrated in a handful of winners, buying oversold laggards is exactly the wrong bet. Over the full 2015-2026 window the average is −0.35%, p(HAC)<0.001.
evidence: 20d bullish vs SPX: 2015-2019 α=+0.52 (positive), 2020-2022 α=−0.78, 2023-2026 α=−0.60
Bullish fails HARDEST in the 'textbook-favorable' trending regime
Trending + low vol, the cleanest setup by classical TA, produces the most negative bullish alpha (−0.64%, N=6,691 at 20d). The intuition — 'dip in an uptrend, buy the pullback' — does not hold at the equal-weight large-cap US level. The best bullish regime is non-trend high-vol (−0.10%), i.e. chaotic markets where mean-reversion sometimes works. Against every benchmark, bullish RSI fails the permutation null (p_perm=1.000 at 20d vs all four benchmarks).
evidence: 20d bullish by regime vs SPX: trending_low_vol −0.64 (worst), nontrend_high_vol −0.10 (least bad)
Bearish has real edge, magnified at longer horizons
Bearish RSI fires when a stock closes above the 70 threshold (overbought). Under Convention A (single-sided long benchmark), a 'good' bearish signal produces negative alpha — the stock underperforms the market. RSI bearish delivers α=−0.34% at 20d (p(HAC)<1e-13, p_perm=0.005), widening to −0.59% at 60d. That's a real, persistent short-side edge. Most of it comes from stocks that were stretched high and then mean-revert while the broader market continues up.
evidence: vs SPX: bearish 20d α=−0.34 p_perm=0.005, bearish 60d α=−0.59 p_perm=0.005
Bearish 2020-2022 was noise
The bearish edge disappears in 2020-2022 (α=−0.005 at 20d). COVID-era fundamentals broke mean-reversion — stocks that hit overbought kept going up because fiscal/monetary stimulus was re-flating everything. Bearish RSI should be de-emphasized or paused during QE-driven liquidity surges.
evidence: bearish 20d vs SPX: 2015-2019 α=−0.54, 2020-2022 α=−0.005, 2023-2026 α=−0.39

4 · Pairing inside a screen

The statements below describe how this signal relates to others by construction — which indicator family it belongs to, and where same-family redundancy might reduce the independence of evidence inside a Daily Report. These are taxonomic classifications drawn from standard technical-analysis texts; they are not pairing backtests. A multi-signal convergence backtest is planned but not yet run.

Oscillator-family redundancy

RSI belongs to the momentum-oscillator family alongside Stochastics, Williams %R, and CCI — each is constructed from closing price over a short lookback, normalised to a bounded range (Murphy, Technical Analysis of the Financial Markets, 1999; Pring, Technical Analysis Explained, 5th ed. 2014; Kirkpatrick & Dahlquist, Technical Analysis, 3rd ed. 2015). Stacking two or more of these in the same direction within a single Daily Report produces correlated rather than independent evidence.

What would likely rescue this signal

This block calls out the data or conditions that could turn a technically weak signal into a usable one in a composite screen. Based on signal mechanics and the observed failure patterns above; individual combinations are not yet backtested.

  • Regime-gate the bullish side — Bullish RSI worked in 2015-2019 (α=+0.52) and broke in the post-COVID era. Conditioning bullish RSI on 'market breadth > 60%' or 'SPX not within 5% of ATH' might restore historical alpha. Testable hypothesis, not yet run.
  • Fundamental filter for bullish mean-reversion — An oversold stock with improving fundamentals (positive EPS revision, rising revenue) is a different population than one with deteriorating fundamentals. The signal would likely rescue bullish if filtered to names whose earnings estimates have been raised in the last 30 days. Requires commercial fundamentals feed (not yet wired).
  • Tighter bearish cooldown — Bearish RSI alpha widens from −0.04% at 5d to −0.59% at 60d. The edge is a slow drift, not a sharp crack. Exit rules that hold through the full 60d window (rather than stopping out on 10% bounces) better capture the signal's value. Bearish signals on stocks that are already in structural decline compound more reliably.

See also Why technical-only signals don't survive on their own for the broader argument.

5 · Before you act — a 5-point checklist

  1. Normal trading day? Rule out earnings (within ±3 days), ex-dividend, or known corporate-action dates — the signal is almost certainly reading noise, not momentum, in those windows.
  2. Where is price vs its own 50 / 200 DMA? A mean-reversion signal firing against the long-term trend (e.g. oversold in a clean uptrend) is much more reliable than one firing with it.
  3. What's the sector breadth doing? An isolated signal in a broadly down-trending sector is a lower-confidence setup than one firing with the rest of its peer group.
  4. Is ADV20 enough for your size? If the trigger is on a $500M name and you want to move $1M notional, you're the tape. Consider adv20d ≥ 5% of your intended position.
  5. What invalidates you? Define a price level (for longs: a close below the trigger-day low; for shorts: close above the trigger-day high) and honor it. The backtest alpha is an average; any one trade can be at either tail.

Execution notes

Entry = open T+1 (day after signal fires on close). 20d horizon offers the clearest bearish alpha (−0.34%); 60d compounds more (−0.59%) but takes on more event-driven variance. Bullish horizons are a waste of time at every tested length — 60d even flips slightly positive (+0.065%) but not significantly. If you must trade bullish RSI, pair it with a structural filter (fundamental improvement, sector breadth) — the raw oscillator on its own is a value trap.